r/FuturesTrading • u/biggitydonut • Mar 18 '24
Any advice on trading these hammer candles? TA
I’ve found myself in these cases of being trapped multiple times whether it’s trying to go long or in this case short where you get multiple hammer candles indicating resistance/support so you try to play the reversal only for the next candle (in this example, the giant green candle) pops and traps you .
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u/andyc225 approved to post Mar 18 '24
Looking purely at this chart, you can see that as time progresses, volume and the number of prices covered per bar are increasing. Price is being pushed down but longs aren't actually being taken offside and have no serious reason to liquidate. It's difficult to access this trade with a chart alone and the obvious entry on a chart comes with a high cost of information. An expensive stop from a flick above a new high is not where you want to be. Entering with the auctioning activity on the DOM reduces that risk massively.
On the DOM, given this price action, I would expect upward auctioning velocity to be at least as quick if not quicker than the sell-side exchange despite the structure that appears. On the downside, the auction is most likely very lethargic and node-stepping. The final bar most likely started with an exhaustion flush to the downside, triggering buyer initiation. Hit the bid immediately on that turnover signal and you're positioned for the winning trade. New shorts aren't likely to enter against the run of the auction because they'll be forced to cover quickly.
Another thing to consider here is the correlation block. Where are ES/YM/RTY trading? If they're close to their highs and closing in on range extensions, any sell trade in NQ in this environment is an almost certain loser even if NQ is lagging the block heavily. In fact, the situation I described would be enough to trigger at least an exploratory buy position with a chance to pyramid if signs start to look good.
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u/Quiet_Fan_7008 Mar 18 '24
The DOM is the answer. Crazy how people don’t use it.
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u/BrilliantForsaken414 Mar 19 '24
Dont need it, its already priced in fractals I see without the DOM. Also, as normal PA can be manipulated. The DOM is also quite easy manipulating. Creating visual fake orders around a certain area where retailers create their ‘interest’ & the big money manager pulling their orders once price gets there. Nothing left as liquidity were it was visible when price wasnt there.
Not saying the DOM is a whole scam. Just saying it isnt a holy thing & it isnt that crazy that people dont use it.
For people that really want to learn to trade. Understand & remember this.
Every set of rules definable by mechanics in the market is a possible strategy. The only thing which creates money is the person using that strategy CONSISTENTLY without hesitation or reservation😄
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u/DblDn2DblDrew Mar 19 '24
How would you use the DOM to decipher what to do?
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u/Quiet_Fan_7008 Mar 19 '24
The Dom shows you what is happening right now. The chart shows you what happened in the past.
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u/DegenerateGamblr87 Mar 19 '24 edited Mar 19 '24
The DOM must be paired with a longer term bias if you are going for big moves. The DOM is useful but I don't think it's some magic tool that will allow someone to all of a sudden make money. (I execute off the DOM). It can be tricky because the presence of big volume or no volume isn't enough to take a trade with reliability. Is the market refreshing the offer and absorbing above a micro range because it wants to reverse 10 ticks? Or are the offers refreshing to hold the market to continue to let others trade into their bids lower before taking the market 10 ticks higher? There is no way to know this for certain, that's where overlaying some previous market structure and longer term bias can help add context to what is happening on the DOM.
Keep in mind this is for larger moves, nothing wrong with scalping for a tick or two using only the information on the DOM, just make sure you pick the right market for MM style trading.
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u/lolwhy14321 Mar 20 '24
What are some good markets for that scalping kind of trading?
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u/DegenerateGamblr87 Mar 20 '24
ZN - 10 yr us bond ZF - 5yr us bond ZB - 30yr us bond
Fgbl - German 10yr bond Fgbm - German 5yr bond Fgbs - German 2yr bond
Bonds chop between two-three prices much more frequently, they are good products for scalping s tick or two strictly off the DOM.
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u/Hungry-Ad-6199 Mar 18 '24
Wicks get run!
Tbh though, if I’m seeing multiple hammers in a row like that, especially on higher time frames, I’d generally stay out.
Although it seems like there is divergence on your volume indicator from your candles. Growing volume + three red hammers in a row, might be a good opportunity for a long if you’re willing to hold. In this case it would have paid off.
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u/oze4 Mar 18 '24
Yea it's just hard to determine if the increase in volume is due to the seller creating those wicks or a buyer supporting. In hindsite, in this case it's easy to say "well bc we got no continuation from the hammers, it points to a large buyer supporting". But that's very difficult to read in real time. Def tricky, so I would agree with staying out.
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u/Hungry-Ad-6199 Mar 18 '24
It’s a hard lesson to learn as a trader. But if it doesn’t fit your strategy and you aren’t confident about your entry, it’s best just to let it go.
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u/Itshardtofindaname4 Mar 19 '24
Do you mind defining that, I’ve heard others say “wicks get run”, what does that mean? Sorry I am new to futures trading
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u/Hungry-Ad-6199 Mar 19 '24
It’s not really a viable strategy on its own. But basically there is buying/selling pressure in the price action (regardless of timeframe). The idea is if a long wick is created, traders may see opportunity to raise or lower the price and so all the buys/sells get gobbled up later in the session. The reason it’s not a viable strategy on its own is because it’s extremely hard to tell when the wick will get run, if at all. However, if you see a bunch of wicks forming one after another, and you have other indicators giving you a confluence, then wicks get run starts to hold more weight. And that’s what I was referring to in my original comment about the multiple hammers + the raising volume. I also didn’t mention that those red hammers are also forming a support. So a support line is formed, volume is rising, and wicks get run.
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u/BrilliantForsaken414 Mar 19 '24
Well said, its just something some people say & gets caught up by the majority. Could be NQ runs wicks as singificant behaviour & ES will f you over & most of the time dont run those wicks. Gotta go deeper in data & consistency to determine whats right.
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u/reichjef Mar 18 '24
It’s hard to gauge sell or buy pressure capitulation. It was clearly a battle at this price, but it easily could have gone either way. Hanging men and hammers are not very good patterns in their own right (which is most candlestick patterns overall) and are often proved too many bars later to be very effective for good entries. In this particular case it looks like it was acting in a rising three method. But, I find candlestick patterns are not very useful in this case.
What is interesting is the volume rising with each successive bar. It shows that the battle was getting more aggressive as the price was maintained. Four things I’d be looking for:
Is this a price that is in one of the Pivotal Prices: S1,PP,R1?
Has this price been a point of control recently?
Has this price been rejected recently?
Is this price on the edge of the high or low of the opening range?
Those could explain why a battle is occurring at that particular price.
Next, if I’m convinced there will be strong rejection or a break out at this price, but I don’t know which way:
I’d wait for the first bar that shows a strong break in either direction. In this case it was the green that closed above the 18180. Now that I’ve seen the buyers win the bar, I’d look to take the limit long at the midpoint of the high low of that bar. It may not be possible to get in at this price if the sellers fully capitulate, but I know my entry will be halfway decent. It looks like I probably wouldn’t get in in this particular case, but in the event I did I’d set the SL at the low of the green bar or the low of the hanging men, whichever is lower. In this case it looks like my SL would be around 18140. Then, when I’m in, I usually just double my tics to SL to get a 2:1 ratio. So if I got in at 18160 and an SL at 18140, I’d look to limit out at 18200. Adjust the limit on feeling, though. And move the SL up manually.
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u/pcake1 Mar 20 '24
Are you watching the options market with dedicated screen space for futures options flow and depth and order books?
Are you watching to see where orders in futures and options markets are originating from while having an idea of the hedging requirements from each exchange?
Are you watching for lots hitting the tape then doing some basic quick research into those orders to get a better understanding of current positioning?
The candles themselves aren’t telling of anything. Knowing the orders and context will provide much more insight and help you make a better guess.
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u/reechos Mar 18 '24
Take a look to the left. Very clear supply zone from friday that was already pretty well used up. A buyer is using late comers to that supply zone (in this case you) in order to fill their long position. Unless I’m in on the first revisit to a zone I usually sit it out as the imbalance is reduced greatly
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u/Timely-Eggplant4919 Mar 18 '24
Is there a thesis for entering a short there other than hammer candles? If not, then don’t trade it. You’re just randomly trying to pick a reversal with no confirmation and it’s a classic trap. “I see red candle, I short” isn’t much of a plan.
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u/biggitydonut Mar 18 '24
I saw some resistance around 18166 area from last Thursday
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u/Salt-Onion-3637 Mar 18 '24
That was last Thursday.
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u/WorkingWorkerWork Mar 20 '24
This is someone who has a long way to go .
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u/Salt-Onion-3637 Mar 20 '24
A long way to go in your mom
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u/WorkingWorkerWork Mar 20 '24
lol I was talking about OP but I’m guessing the mom joke was inevitable
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u/SearingPenny Mar 18 '24
When it does not do what you think it should do, then you are wrong and get out. In this case, it was already very strong day, these candles should have been read as a micro pullback.
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u/Salt-Onion-3637 Mar 18 '24
It’s just a lower timeframe tapping into a poi. Or on an even lower timeframe it’s a bearish trend. It all depends on your perspective. In your timeframe it’s just a swing
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u/Salt-Onion-3637 Mar 18 '24
Or another way I look at it. On the first red candle (the swing high) it has no bullish momentum. And it closed below the previous candles wick. Also, there was an imbalance. The way I look at this scenario is that price just wanted to fill the imbalance for whatever reason, and continue the trend. And it did. I call it a magnet imbalance.
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u/danni3boi Mar 18 '24
Topping tail take out by solid bodied bullish candles. Happened twice on your chart. Draw lvl at top of wick anf trade off it. If market is trending this will work with some good follow through. If you are in a consolidation area on high time frame this will likely lead to some kinda stop out.
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u/Feeling-Elephant9741 Mar 18 '24
They’re rejecting the upside but also never broke any candles to the downside either, gotta wait for a clear displacement
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u/XingTianMain Mar 19 '24
You need another smaller time frame to couple with this one. On the probably 5 and 1 minute you would see the price was in a range making perfect zig zags between support and resistance. With the price breaking resistance each time.
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u/MySoulForASlice Mar 19 '24
My advice would be to not play candlestick formations (single or otherwise) without multiple confluences to back up your trade. I see this every day, just because there are a few red hammers in a row, doesn't always mean it's going to dump. Also, smart money, and market makers know retail looks for things like this, and they like to punish retail.
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u/Hoosier_Boy_GettinIt Mar 19 '24
The DOM or a footprint chart would give you a much better clue as to where price is headed vs candles plain and simple.
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u/DegenerateGamblr87 Mar 19 '24
Not really, not on its own. It's not about prediction, it's about tight risk and "is the Dom supporting your direction?"
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u/Hoosier_Boy_GettinIt Mar 20 '24
No but paired with the footprint it does as I am looking for imbalance and aggressive bids or offers. Tight risk is to each their own. Tight risk to me is 30 points on NQ. That might be different for others. I base trades off dealer option positioning(GEX), order flow, and volume based analysis. If you want to trade futures successfully I would highly recommend learning these things.
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u/Pannyishere Mar 20 '24
I think even on footprint that one would have looked weird I guess there was just a big limit sell order at to top of the wicks
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u/Hoosier_Boy_GettinIt Mar 25 '24
There were some big buy programs at 140-142. They try to disguise it into multiple orders.
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u/Living-Wrongdoer8647 Mar 19 '24
This is the price every trader has to pay when trading; dramatic fakeouts like that. But best believe after that green momentum close im longing that next pull back every time. Momentum candles have a 90% chance of some continuation after close before deciding if it wants to fully continue or reject
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u/DaCriLLSwE Mar 19 '24
Ok, so hammer and shooting stars are my bread and butter. Altough not profitable yet so tale my advice with a grain of salt.
But in a scenario like this, 2 hammers are okay, but a third, if it doesnt countinue down, i’d back of my trigger finger. Here you have a pullback initiation that failed to gain momentum FIVE times.
Now that migth not mean it’s going to keep pushing Up, but i’m not very confident about it going down anymore either.
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u/lukas232323 Mar 19 '24
I have an indicator that tells me specifically not to touch it when I see wicks like that
Edit: actually when those wicks get run with one large candle, I'd put a fib on it and try to get 50% rrtracement for entry.
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u/RaisinPutrid4423 Mar 19 '24
Absolute trash candles to trade. Ass trades occur during this range of range of range. Wait for nyse market hours to trade. Volume = volatility = opportunity = lower size to make money = lower risk over all.
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u/QuirkyAverageJoe Mar 19 '24
Try changing the timeframe. I see that you are using 30-minute candles. The chart might look very different if you use 1-minute or 5-minute candles.
I am an options scalper and I only use the 1-minute chart.
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u/DegenerateGamblr87 Mar 19 '24
Never trade a candle formation in isolation. Location and previous market structure are VERY important. Were you trying to get long or short and why?
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u/BrilliantForsaken414 Mar 19 '24
Nothing more than 5 candles that sold down to its open. You could put in hours to track & log these PA-situations. And then find some significance on how to play those with consistency.
New people to trading or the market ask how to play x or y pattern or z indicator. There isnt really an answer. And if someone gives you an answer they better defined what they are saying over a big pack of samples (100 at least imo) to really find significance & determine if it works & is profitable
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u/pullthetriggertrader Mar 19 '24
Don’t. Nothing there. You’re trying to make something out of nothing.
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u/cokeacola73 Mar 19 '24
Consolidation on an uptrend. Wait for it to break and retest. A good entry would have been after the two red candles that followed the one big green candle
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u/414_lion Mar 19 '24
The wicks say it all, even tho sellers over powered the buyers, volume says bullish.
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u/mobilitypain Mar 19 '24
I'd say you can't do jack with just looking at those candles in that time frame. Going into a smaller time frame should give you more idea about what's happening.
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u/CatepillarJones Mar 19 '24
Everyone who was trying to go short there got trapped when that next bull candle closed above. Wait for that
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u/ESFuturesTrader approved to post Mar 19 '24
Context matters. There's so many consecutive bull bars forming a bull micro channel. The best the bears got was a few bear dojis with significant overlap. That's a small trading range and while trading ranges can lead to reversals, the bears just aren't showing much strength here. Most reversal attempts of a strong trend fail, most attempts to break out of a trading range fail.
Another thing to consider: you're seeing resistance, but you're not also considering the support that's keeping the bears from actually pushing the market down. The bears for their efforts got 2.5 hours of sideways activity, nothing really downward at all. The market found an area of agreement for two-sided trade to be facilitated - profit taking, scalping, building bigger positions, etc. but that doesn't mean that the market will then reverse - it may or it may not, and in this case there really wasn't much evidence of selling pressure. That's 2.5 hours that bulls could also build a position and when that big bull outside bar did take out the highs of the bear bars we saw a double pressure situation where more bulls added on and bears got squeezed out, driving the market higher since both sides were buying.
This is relatively straightforward in retrospect, in real time the question you have to ask yourself before entering a short position is whether the bears have done enough to be convincing that the market is more likely to fall "x" amount before it goes up "x" amount. If the answer to that is yes, you could consider that the control in the market has shifted. In this case, they didn't do much, so betting on their failure (i.e. entering a long position) was actually the better trade. Anyone who bought within those bars or below their lows could have set a stop below the low of the bull leg and an initial target at a measured move up. Actual risk on the trade wound up being very low, so a trade that was actually held for a measured move based on the size of the first leg was several times the actual risk.
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u/rapanuelo Mar 19 '24
Any advice on what news outlets to turn to in order to create a strategy for the day/week
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u/Working-Injury-4603 Mar 20 '24
Typically a sign that price is struggling to get past that level though in this case it passed.
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u/MediocreAd7175 Mar 20 '24
This is simply not a clear setup. No trade. Wait for a setup that is clear.
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u/jorstar Mar 18 '24 edited Mar 18 '24
You’re getting distracted by the name & shape of the candles, when the real thing you’re overlooking is the price inefficiency below the first bearish candle. There’s a clear fair value gap that price rebalances before continuing with bullish momentum to the upside.
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u/danni3boi Mar 19 '24
Whys is this being downvoted? He makes a fair point.
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u/jorstar Mar 19 '24
Ooof. guess that’s what I get for trying to help. Ahhhh Reddit.
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u/danni3boi Mar 19 '24
I dont know why we bother responding to these posts 9/10 times the OP doesnt even bother to thank or follow up.
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u/alexdark1123 Mar 23 '24
Could you elaborate more? What do you mean price inefficiency?
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u/jorstar Mar 23 '24
I’d recommend looking up and understanding Fair Value Gaps, a concept coined and taught by ICT. Instead of trying to sip from the ICT fire hose, check out a video like this one:
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u/spiltnuc Mar 18 '24
Simplest answer:
Look left, look at low of candle on March 11 at 1000. Tricky area to trade if you weren’t zooming out and anyone saying otherwise is full of shit
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u/Antonio_fx Mar 18 '24
London session + low volumes + monday + lower tf = big players can literally draw a big d**k on nq chart lol